The book documents the difference between invoices and transactions in section 34.2:
When a business decides not to use the order management as per the previous
chapter it may ïnd itself in need to manually enter invoices. But even if it does
use order management, it may be necessary to enter an invoice directly.
When creating a transaction to record that the company owes another entity
(a vendor invoice) or that it has outstanding receivables, LedgerSMB offers two
options:
1. Invoices
2. Transactions
Transactions have very limited functionality: they allow a user to enter a
debt owed or owned into the AR and AP subsystems. They also require the
user to think how the other side of the transaction should be registered; i.e.
which cost account the AP transaction should be posted against, or which income account the AR transaction should be posted against. If there are sales
taxes applicable, the user is required to manually calculate and enter them.
Invoices offer a much more clever set of functionalities. First of all, it allows
the user to create a document to be sent to the vendor or customer. Second, invoices take advantage of parts and services to automate calculation of sales
taxes. Third, invoices update inventory for items held in stock (parts, assemblies). Transactions offer none of this.
Which means that if you don't want to update your inventory, you should use a transaction, if you do want to update inventory, you should use an invoice. Note however that inventory won't be updated for invoiced services: services aren't held in stock.
So: it really depends on what you mean by "does an invoice become a transaction". Invoices are recorded in the ledger as transactions. You don't need to do anything special for that.Â
I hope that explains.
Erik.